Previous Page 2 of 23 Next A mortgage incurred in the purcha

Previous Page 2 of 23 Next? A mortgage incurred in the purchase of an office building would be reported on the statement of cash flows in O a. the Cash Flows from Financing Activities section. O b. the Cash Flows from Operating Activities section. O c. the Cash Flows from Investing Activities section. O d. a separate section that appears at the bottom of the statement.

Solution

1) As mortgage is incurred in the purchase of an office building, there is no cash flows in this case. Therefore this will not be shown as a part of cash flows from any of three activities but it will be shown as a seperate section that appears at the bottom of the cash flow statement. Hence the correct option is d) a seperate section that appears at the bottom of the statement.

2) Sorry the data in the second image is not clearly visible

3) An increase in common stock will be shown as an inflow under cash flows from financing activities. Therefore the correct option is a) increase in common stock account.

4) As the dividends of $20,000 is only declared but not paid, there is no cash flows for dividends in the given year. Therefore the correct option is d) Cash paid for dividends $0.

5) On the statement of cash flows, firstly cash flows from operating activities are shown and after that cash flows from investing activities are shown, followed by cash flows from financing activities. Therefore the correct option is c) Cash flows from investing activities.

6) The ending figure on the statement of cash flows is ending cash balance, thus it should be matched with cash balance shown on the balance sheet. Therefore the correct option is b) Cash balance.